Oil Prices Fall After Iranian Response to Israel: Market Reduces Risk Premium

Oil prices fell at the open Asian marketsToday, Monday, with market players reducing risk premiums, in the wake of… Iranian attack on IsraelLate on Saturday, the Israeli government said it had caused only limited damage.

By 12:56 GMT, Brent crude futures for June delivery fell 24 cents to $90.21 a barrel, and West Texas Intermediate crude futures for May delivery fell 38 cents to $85.28 a barrel.

The attack included more than 300 missiles and drones, and is the first to target Israel from another country in more than 30 years. It raised fears of a broader regional conflict affecting the movement of oil in the Middle East. But the attack, which Iran described as a response to an air attack targeting its consulate in Damascus, resulted in only minor damage, as the Israeli Iron Dome defense system, with support from other countries, shot down most of the missiles. Israel did not confirm or deny its responsibility for the attack on the Iranian consulate.

Oil prices rose on Friday with anticipation of the Iranian response to the targeting of its consulate, and touched their highest levels since October. But prices ended the week’s transactions down 1%, after the International Energy Agency lowered its forecast for oil demand growth this year.

Despite the limited damage to Israel from the Iranian attack, analysts were widely expecting at least a short-term rise in prices this morning. Jorge Leon, Rystad Energy’s senior vice president, said the attack represented a “dangerous and unprecedented development in an already volatile region.”

Analysts said the more significant and longer-term impacts on prices resulting from the escalation would require significant supply disruptions, such as shipping restrictions in the Strait of Hormuz near Iran. “Crude oil prices already have a risk premium built in, and the extent of their expansion depends almost exclusively on developments near Iran around the Strait of Hormuz,” said Ole Hansen of Saxo Bank. About one-fifth of the total volume of global oil consumption passes through it daily.

The Commander of the Navy of the Iranian Revolutionary Guard, Ali Reza Tangsiri, said last Tuesday that Tehran will close the Strait of Hormuz if necessary. The Islamic Republic News Agency (IRNA) reported yesterday, Saturday, that a Revolutionary Guard helicopter boarded the ship “MSC Ares” flying the Portuguese flag and headed with it to Iranian territorial waters, indicating that the ship is linked to Israel. So far, the Israeli war on the Gaza Strip has had little tangible impact on oil supplies.

(Reuters, Al-Arabi Al-Jadeed)